NEO GROUP CJEU Decision: When Is Genuine Economic Activity Not Enough?

On October 15, 2026, the Court of Justice of the European Union (CJEU) delivered its judgment in NEO GROUP (C-203/25) on the anti-abuse rule in the Parent-Subsidiary Directive (PSD). The headline message looks stark: an EU holding company that carries on a genuine economic activity may still be denied the PSD withholding tax exemption if it participates in a chain of transactions, some of which are non-genuine. However, on closer analysis, the decision complements existing CJEU caselaw in this area and arguably moves the dial less than might initially be feared.

Why is this case important?

Article 5 of the PSD exempts distributions of profit from a subsidiary to its parent in another member state from withholding tax. Since 2015, Article 1(2) and (3) of the PSD has contained a minimum anti-abuse rule: the benefits of the PSD are not to be granted to an arrangement, or series of arrangements, that has been put in place for the main purpose, or one of the main purposes, of obtaining